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Rates and Pricing

Utility Rates and Pricing Workshop

  • Are all of your customers contributing to margins or are margins on some customers negative?
  • Would your current rate design result in price exposure in a retail choice environment?
  • Do your existing rates result in substantial revenue and margin variability due to weather?
  • Do you need to unbundle your existing rates?
  • Are rate menus a tool that you could use to better satisfy your customers?
  • How can you use pricing to create a value environment for other products and services?
  • How can you protect revenues from your core business in a retail choice environment?

Learning Objectives

1. Cost Allocation

a) Cost of service studies

i) Functionalization

ii) Classification

iii) Allocation

iv) Class rates of return

v) Class averages and how they can be used

(1) Developing Marketing strategy

(2) Targeting economic development efforts

(3) Assessing and communicating benefits of marketing

b) Individual customer profitability

i) Financial management

ii) Rate re-design

iii) Market segmentation

iv) Targeted pricing

v) Targeting marketing efforts

2. Cost recovery principals

a) Fixed costs

i) Customer, service and facilities charges

ii) Demand charges

(1) Purchased power and generation

(2) Distribution

b) Variable costs

i) Energy charges

ii) Fuel adjustment clauses

c) Embedded cost pricing

d) Marginal cost pricing

e) Real time pricing

3. Rate design

a) Two part rates

b) Three part rates

c) Time of use rates

d) Interruptible rates

e) Seasonal rates

f) Geographically differentiated rates

g) Real time pricing

h) Rate unbundling

i) Reflecting unbundled prices on the bill while continuing to bill on a bundled basis

ii) Billing on an unbundled basis

(1) Cost causation

(2) Margins

(3) Degree of disaggregation

i) Bundling rates with other products and services

j) Using rates to create a value environment for other products and services


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